Income tax department in the name of e-campaign has unleashed a reign of fear in the last week of the calendar year 2022. SMS saying you had entered into high value financial transactions and not reported them in the return for the assessment year 2022-23 has gone out to a large number of taxpayers followed by email detailing the purported omissions.
Section 139(5) of the Income Tax Act says a person can file a revised return within nine months of the assessment year but such revised return cannot be filed if the assessment order has already been passed. So, for the financial year 2021-22 for which the default date for filing the return is 31st July 2022, the deadline for filing the revised return is 31st December 2022.
Obviously, the idea behind the frenzied last-minute notices is to pressure the taxpayers into filing revised returns. In its overzealousness however the department has gone overboard and sent out notices even to those whose assessment has already been completed and refund of excess tax paid made! To be sure, an assessment order is not cast in stone. For, reassessment can be made where there is a suspicion that some income has evaded tax. Ditto for rectification of mistakes.
Similarly, section 263 vests with the Commissioner the power to revise the orders passed by assessing officers which he finds to be prejudicial to the Revenue. But the issue here is not if the department’s hands are tied in the face of mistake or non-disclosure. The issue is illegitimate pressure mounted on the honest taxpayers.
How can the department expect an assessee to file a revised return when section 139(5) expressly bars one from doing so when assessment is already over? It is also strange that the year-end notices speak with a forked tongue----starting with accusation you have omitted to disclose income and ending with a tame apology that in case you have already shown the alleged omissions in the return, please ignore the notice!!
Obviously, the software used for flagging high value transactions like purchase of property for cost in excess of Rs 30 lac or investment in mutual funds in excess of Rs 2 lac etc., has been used indiscriminately to flag even transactions that have been reported in the income tax return. The law has been used in the manner of dragnet---fling it far and wide in the hope that while the honest would of course be harassed, there is a possibly that some crooks may be netted. This is a cynical and ignorant abuse of the law.
The e-campaign instead should have brought the new section 139(8A) that allows one to file an updated return before the expiry of 24 months from the end of the relevant assessment year whether one has or hasn’t filed the original return, or revised return or belated return to the notice of the public. The idea behind this section is better late than never and promote voluntary compliance albeit belated.
The income tax department is often desperate to increase tax collections. With this in mind, it often sets unrealistic targets to the Commissioners who in turn set even more unrealistic targets to assessing officers reporting to them. At their wit’s end, the assessing officers resort to what is known as high-pitched assessments which are more often than not set aside on appeals by the tribunal or high court. The latest move however is to panic the taxpayers without discriminating between honest and dishonest.
The department is wasting its amenities. It should probe cases of high value transactions not reported. It should prevail upon the government to revive wealth tax so that the assessing officer can view the genuineness of the income disclosed against the backdrop of the assets owned by him. Assets of Rs 1000 crore but income of just Rs 10 crore should arouse suspicion and trigger vigorous investigation. In other words, assessment of income in juxtaposition with assessment of wealth. That is why countries like Colombia once set store by visible signs of wealth to ferret out one’s income. An owner of a swanky car was presumed to be earning certain income and an owner of a palatial house was presumed to earn certain income. Of course, in democracies such presumptions can be attacked as arbitrary but they can be the starting point for prising open the secretive empire built by one.
—The author S Murlidharan
is a CA by qualification, and writes on economic issues, fiscal and commercial laws. The views expressed in the article are personal.
Read his previous articles here
(Edited by : C H Unnikrishnan)
First Published: Jan 1, 2023 10:38 AM IST
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